BAAC ready to dish out farmer cash

The state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) plans to begin using proceeds from specialised assistance funds to pay farmers once the total reaches 1 billion baht as expected by tomorrow, president Luck Wajananawat said on Monday.

After a series of failed borrowing plans to pay more than 1 million farmers for their pledged rice (due to the government's fragile caretaker status), the BAAC launched three aid funds for farmers with an aim to raise 20 billion baht.

The first fund is for donations, the second is interest-free and the third carries a low interest rate of 0.63%.

The funds will be open for donations and subscriptions until June 30.

Mr Luck said the caretaker government is required to put money raised from selling stockpiled rice into the second and third funds, while the BAAC will ask the Finance Ministry to set aside part of the 2013-14 rice pledging budget for interest payments.

The third fund is estimated to have a maximum interest burden of 126 million baht.

The caretaker government is months behind in its payments to more than a million farmers who pledged paddy for the 2013-14 main crop.

The BAAC, which assumed responsibility for handling payments in the pledging scheme, has already paid 68 billion baht to farmers, with about 110 billion baht still unpaid.

The caretaker government first suffered a setback when it sought funds to pay farmers via bridging loans from financial institutions, which were loath to take part because of concerns about the legitimacy of such borrowing.

The government failed again in its next attempt when the Government Savings Bank was hit with a deposit run of more than 100 billion baht in a single week — a reaction to a proposed 5-billion-baht loan to the BAAC that GSB depositors viewed as an under-the-table deal to help the state avoid borrowing restrictions.

The latest scheme to let the BAAC issue promissory notes with an initial lot of 20 billion baht last week also flopped, as state enterprises voiced concern that such note issues could breach the constitution and spur protests from labour unions.

Despite the setbacks, the BAAC floated an idea to raise funds from savings bond issuance, Mr Luck said, adding that the bond issuer could be either the Finance Ministry or the BAAC.

But it may take months for the BAAC to issue such bonds without the Finance Ministry's guarantee, which must also pass constitutional muster.

To alleviate the unpaid farmers' burden, the BAAC will extend the loan repayment period for them by an additional six months and offer 40 billion baht in new loans with a maximum 100,000 baht per farmer, Mr Luck said.

Some 80 billion baht in loans to rice farmers is due for repayment during the first three months of this year.

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